Holiday Sales End High on Low-End
Todd Wasserman
Waltham, Mass.
4:28 PM EDT, Mon., Dec. 28, 1998
The 1998 holiday season tipped the scales in favor of sub-$1,000 PCs, as the category comprised the majority of sales for most retailers.
Intel next Monday will pay further homage to the trend by announcing two new desktop Celeron chips-a 366MHz and an unexpected 400MHz version-in a clear recognition of the undeniable growth of "basic" PCs.
But market watchers indicated that the low-end frenzy suffered some missteps during the holidays. There were some returns and consumer frustration regarding rebates, which PC makers and vendors used in unprecedented numbers to create the appearance of even-lower prices, retailers and analysts said.
"This year is probably the most predominant use of rebates we've ever seen," said Cameron Duncan, an analyst for ARS in Irving, Texas. "I would imagine there's a lot of consumer frustration."
Four of the top five PC SKUs in November sold for less than $1,000, but the real growth was in the sub-$800 category, according to PC Data, Reston, Va.
In November, that grouping composed 37 percent of sales, up from 4 percent in November 1997, PC Data reported. This percentage does not include advertised after-rebate prices.
Although solid sales figures were unavailable at press time, anecdotal evidence confirms sales of sub-$1,000 and especially sub-$800 systems fueled strong holiday sales.
American Appliance has been selling Packard Bell PCs for $399 and $499, after $200 in rebates are deducted, but is finding few customers willing to buy them.
"We are doing more with computers priced between $700 and $900, after rebate, than with those priced less than $700. I think people are being frightened off. They are saying, 'What am I getting for my $400?'" Steven Hassall, computer buyer for American, said.
In a briefing with analysts in mid-December, Best Buy said its sales of sub-$1,000 units composed the bulk of its PC sales.
Vendor Emachines, which offers a $499 SKU and a $399 SKU (with rebates), said the company experienced a strong entry into the market.
"Our feedback from retailers has been fabulous," said Stephen Dukker, president and CEO of Emachines.
Retailers reported that, although the profit on the products are thin, margin-fattening add-on sales are common.
Jeff Kirschblum, vice president of marketing at New World Computers Direct and Nationwide Computer & Electronics, both based in Edison, N.J., said the Emachines units are strong sellers and lend themselves to numerous add-on sales.
"When you've got a USB port on the front [as Emachines systems do], it makes a spiel about USB peripherals that much easier," he said.
Customers at a Micro Center store in Cambridge, Mass., who expressed interest in an Emachines unit were strongly encouraged to spend an extra $100 to upgrade the machine's RAM.
However, some retailers reported that returns among sub-$600 systems were higher than normal.
A merchandise manager for a regional retailer in the Midwest said he no longer offers low-end systems from lesser-known vendors because of quality issues. Since Packard Bell NEC pulled out of most regional chains, he said he has had trouble getting any first-tier PCs priced at $599 or lower.
Dukker said Emachines boasts a low return rate of 3 percent.
National retailers, meanwhile, continued the practice of advertising the after-rebate price of a system in large, bold letters, while noting the often multiple rebates in fine print. A CompUSA circular published the weekend of Dec. 20, for instance, trumpeted a 333MHz AMD K6-2-based Packard Bell bundle, including monitor and printer, for $799.95. In fine print, the retailer noted that the system carried a before-rebate price of $1,179. The offer included a total of five rebates, including one in-store, one through the Internet and three mail-in rebates.
crw.com |
